With a reputation as an accurate, straightforward economist, Alan Beaulieu has been delivering award-winning workshops and economic analysis seminars across the world to thousands of business executives for the last 30 years.
The following are viewer-submitted questions from our July 27 Executive Series Webinar, “2030s Great Depression Update.” The recording of the webinar is available here.
Residential Real Estate
“Would you buy (a) house in 2024 as you suggested?”
Yes, I would, if I was in the market for a house and if mortgage rates relax as we think they will. A factor to be considered is where you buy the home. I would avoid buying a home in a place where population decline will likely work against any gains in the price of the home derived from inflation. It is also a good idea to gain as much equity as possible in your home over the next 5–6 years to avoid being upside down in a mortgage should home prices in your area fall in the depression.
“Regarding domiciles, my wife is 73 and I am 63. We own the home we live in now. It is older and requires a lot of maintenance etc. We think we need to downsize to a newer, smaller "forever home." We can theoretically sell our current house and use the funds to buy the smaller house with cash. When should we buy that forever home? And if you say sell later, where do we live?”
Congratulations on the success in life that has brought you to where your home is paid off and you have this positive decision to make! Housing price trends will vary depending on where you live, but in general you can look for stability or perhaps some measure of decline in housing prices as the economy moves into recession next year. “Some measure of decline” may be slight or nonexistent in a lot of places, as home prices normally serve as a sure store of wealth and the upcoming recession is projected to be mild.
It is hard to say what “a lot of maintenance” translates to, but if you are tired of doing the work or paying for the work to be done, then I would suggest you sell your home now while home inventories are tight and look for that forever home. There is likely no reason to wait to move into that forever home.
“If securing mortgage and investing in real estate between now and 2024, do you recommend selling the assets in the early 2030s and investing again in 2036?”
The “investing in real estate” makes me think we are talking about residential rental property, so I will go with that assumption. As with all real estate, it is about location and in this case also the intended tenant market. Property aimed at the middle class could run into more difficulties in the depression, which would result in diminished cash flow. Other government actions may also make it more difficult for a landlord in tougher economic times. These are not insurmountable problems, but they are why I would recommend selling near the peak and reinvesting again near the trough.
“I am sitting on a million dollars + in cash right now. How should this be invested over the next 5 to 6 years.”
That is a straightforward question but there is no straightforward answer, as there are way too many variables that would need to be discussed (risk tolerance, goals, other investments, and age, as examples). In general, it is a good idea to talk to your wealth adviser about how best to protect yourself in a period of growing inflation and higher interest rates that are coming later in 2025 and likely through the rest of the decade. Proper investing will allow you to build well in that environment. I would recommend Clark Bellin at Bellwether Wealth (firstname.lastname@example.org) if you do not have someone or would like to explore how the ITR Optimizer™ might serve your interests.
Recovery Following the Great Depression
“Do you agree that WW2 helped pull us out of the 1930s depression? If so, what will pull us out of the 2030s? Another WW?”
A demand in the increase in goods and services, whether from a war or not, is needed for an economic recovery, whether it is from a recession or a depression. Demand can be encouraged by the availability of money, which spurs spending, as we just saw during and right after COVID. It can also be encouraged by the availability of something new that revitalizes consumer and business demand. Think of the automobile and how that not only changed the horse industry but just about everything else too.
The answer to your question will likely be multi-factorial, but two likely sources are found. The peak death rate for baby boomers will be in the late 2030s. These people will be missed, but the money spent on them in terms of Social Security, pensions, and health care can be redirected elsewhere and potentially used to spur consumer spending and thus create demand.
Another likely factor is the appearance of a new technology that will have a tremendous impact on consumers and businesses through utility gains, general consumption, production, distribution, and eventually maintenance. The benefit will not be all at once, but it will grow and spread through the economy until a recovery is under way. We do not know what this new technology will be, but we are confident that something significant will occur in the coming decade.